Attack On Lung Cancer: Eli Lilly Vs. Rivals

In February ramucirumab, an experimental drug from Eli Lilly (NYSE:LLY) showed a statistically significant improvement in overall survival and progression-free survival as a second-line treatment in NSCLC (non-small cell lung cancer) patients.

The Phase 3 trial compared ramucirumab and docetaxel (brand name Taxotere, made by Sanofi (NYSE:SNY)) to placebo and docetaxel in NSCLC patients whose disease has progressed into a metastatic disease after failure of prior platinum-based chemotherapy. The study included both nonsquamous and squamous patients.

Lilly says it intends to file for approval of the drug in the U.S. in 2014, and possibly also in Europe in the same year. In Japan, it may file in 2015, as soon as more data is collected about Japanese patients.

The lung cancer study was the first of three Phase 3 trials of ramucirumab that are due to report this year. The next two are results in liver and colorectal cancers. Previously reported were a failed study in breast cancer and two successful trials in gastric cancer.

Ramucirumab

In second-line treatment: In the current trial, called Revel, 10 mg per kg of body weight of ramucirumab was administered to patients intravenously on day 1 of a 21 day cycle along with docetaxel dosed at 75mg/square meter of body surface. The chemo was also administered intravenously on the same schedule.

More than 1200 patients were enrolled across 26 countries with both squamous and nonsquamous NSCLC. Detailed statistics will be released at an upcoming scientific conference.

Richard Gaynor, MD, senior vice president of product development for Lilly Oncology stated:

"Revel is the first positive Phase 3 study of a biologic in combination with chemotherapy to demonstrate improved overall survival compared to chemotherapy alone in second-line non-small cell lung cancer."

Ramucirumab is a fully human monoclonal antibody that targets vascular endothelial growth factor (VEGF) receptor-2. It is designed to directly inhibit angiogenesis, a process by which blood vessels supply blood to tumors. In that respect it is a relative of Roche's blockbuster Avastin.

First-line treatment: Ramucirumab was also studied as first-line therapy in patients with advanced NSCLC in combination with chemotherapies paclitaxel and carboplatin.

Forty patients received ramucirumab, paclitaxel, and carboplatin on day one of a three-week cycle for up to six cycles, followed by maintenance ramucirumab. Each infusion lasted one hour.

Since 2006, the combination of Avastin (bevacizumab) and platinum-based chemotherapy is the first-line treatment standard for patients with advanced, non-squamous cancer.

Most chemotherapy regimens use platinum compounds, either cisplatin or carboplatin. Combinations may include paclitaxel (Taxol) and carboplatin or cisplatin.

The positive lung cancer results are a major step in Lilly's strategy. Last year, the drug failed to meet its primary endpoint in a Phase 3 breast cancer trial, dashing hopes for that lucrative indication but it hit its overall survival and progression-free-survival marks in two gastric cancer studies.

Ramucirumab, gained by Lilly through its 2008 acquisition of ImClone Systems, is being investigated in clinical trials as monotherapy and in combination with other anticancer therapies for the treatment of multiple types of cancer.

Markets

Lung cancer is the leading cause of cancer death in the U.S. and most other countries, killing nearly 1.6 million people worldwide each year, according to the International Agency for Research on Cancer.

In the U.S., lung cancer is responsible for nearly 30 percent of all cancer deaths, more than those from breast, colon and prostate cancers combined, as per statistics provided by the American Cancer Society.

Stage IV NSCLC is a very difficult-to-treat cancer and the prognosis for patients with NSCLC is poor when locally advanced or metastatic, according to the National Cancer Institute.

Ramucirumab's potential use in a second-line NSCLC treatment represents a significant commercial opportunity.

Roche's Avastin sold approximately $7.1 billion worth of drugs in 2013 and out of that maybe 20 percent was for NSCLC.

According to Roche's own admission, Avastin's use covers only a small portion of the eligible NSCLC patients population, about 40 percent in the U.S. and 15-20 percent in the major European markets.

Competition

Nintedanib: Another biological drug that also has shown improvement in overall and progression-free survival in combination with docetaxel in second-line NSCLC treatment is nintedanib from Boehringer Ingelheim.

Nintedanib in combination with docetaxel appears to be especially effective for patients with adenocarcinoma.

Anti-PD-1: The experimental anti-PD-1 drugs are most promising for several cancer types including lung cancer.

These drugs in clinical trials target the inhibitory T-cell co-receptor PD-1 and the ligand PD-L1: MK-3475 from Merck (NYSE:MRK), BMS-936558 from Bristol-Myers (NYSE:BMY), MEDI4736, from AstraZeneca (NYSE:AZN) and MPDL3280A from Roche (OTCQX:RHHBY).

All four molecules uncloak T cells and differ from any existing drug. All of them have excelled in early trials. The benefits of all four medications have proven long lasting in many patients and, early combination trials suggest their benefits are additive to those of other immune modifiers targeting CTLA-4, like Yervoy from Bristol-Myers.

But so far, it appears from the results that only about 20 percent of patients respond positively, which leaves the 80 percent failing to respond and looking for a different therapy.

A fair assumption could be made that ramucirumab probably works well in combination with a PD1 therapy, but the assumption cannot be proven as no such trial is running as yet.

EGFR inhibitors: Another group of experimental drugs of interest are next-generation EGFR tyrosine kinase inhibitors, such as CO-1686 from Clovis Oncology (NASDAQ:CLVS) and AZ9291 from AstraZeneca.

Early trials indicate that both of these drugs effectively target not only single mutations but also those that have second-site mutations such as T790M and have thus grown resistant to the first-generation treatments such as Tarceva made by Roche or Iressa made by AstraZeneca.

A Phase 1 & 2 trial of CO-1686 found tumor shrinkage in about three-quarters of patients with the T790M mutation. Those early trials have indicated that the next-generation drugs are far better tolerated than existing medications. Side effects rarely go beyond rash and diarrhea.

Necitumumab: Another well-tolerated compound is the monoclonal antibody necitumumab, another lung cancer drug made by Eli Lilly. The company has announced that necitumumab combined with Gemzar (made by Eli Lilly) and chemotherapy cisplatin improved overall survival when compared with chemotherapy alone in patients with advanced squamous lung cancers in a Phase 3 trial. This is a badly underserved market and finding an effective treatment would be a significant achievement.

Ramucirumab vs. Avastin: It seems likely that Lilly will now advance ramucirumab into a first-line NSCLC setting which would position the drug to compete more directly against Avastin. Should necitumumab also be filed for approval in 2014 in this setting, the question is how ramucirumab might interface with necitumumab in the squamous NSCLC population.

Also, the survival ratio of patients with the squamous form of NSCLC compared to those with non-squamous was not yet disclosed from the recent trial. This can be a crucial information because Avastin cannot be used in squamous patients, potentially opening up a market opportunity.

Squamous cell lung cancer is a form of non-small cell lung cancer. Eighty percent of lung cancers are non-small cell lung cancers, and of these, about 30 percent are squamous cell.

Sales potential

If ramucirumab gets approved for all four indications that Lilly is hoping for at this point, the revenue from the drug could peak at $1.3 billion a year, according to Leerink.

Bernstein analyst Tim Anderson believes that ramucirumab will pick up its first FDA approval in 2014, and figures that a lung cancer indication could mean $1 billion in sales on its own. Additional approvals would add to that.

Investors' summary

Eli Lilly confirms its guidance for 2014 and expects to earn $2.77 - $2.85 per share on revenues of $19.2 - $19.8 billion.

Eli Lilly bought back shares worth $500 million during the fourth quarter. Approximately $3.8 billion in cash was returned to shareholders in 2013 through dividends and share repurchases.

As the guidance shows, the company is facing tough times ahead. 2014 is shaping up a challenging year for Eli Lilly with two of its major products facing generic competition. Cymbalta has already lost exclusivity in the U.S. and should see a sharp decline in sales and Evista is slated to lose patent protection in March.

Products like Humalog, Trajenta, Cialis, Forteo, Alimta and the animal health business should help partially offset the impact of the generic competition. The Chinese market may also add to the growth, although Japan could be weaker due to currency fluctuations.

Gross margin is expected to decline significantly to 74 percent from the current 76.1 percent.

Eli Lilly is also working on controlling costs. Marketing, selling and administrative expenses should decline to a range of $6.2 - $6.5 billion from $7.1 billion in 2013. Research and development expenses are expected to decline to $4.4 - $4.7 billion from $5.5 billion in 2013.

The 2014 guidance does not include the impact of a $200 million upfront fee that will be payable to Pfizer (NYSE:PFE) if the partial clinical hold on pipeline candidate, tanezumab, is lifted.

Eli Lilly should return to growth from 2015.

Ramucirumab is part of a late-stage trio Lilly CEO John Lechleiter expects to win near-term approvals and steer his troubled company into a post-patent-cliff future.

Ramucirumab is joined by dulaglutide, a GLP-1 diabetes treatment that could be part of a crowded market, and necitumumab, a lung cancer treatment designed to succeed Erbitux.

Investors in Eli Lilly desperately hope that the CEO proves right and the promised blockbusters finally start coming.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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